Key points
- Contracts define what a buyer acquires.
- Change-of-control terms depend on the specific wording.
- Share and asset sales are treated differently.
- Have significant contracts reviewed by a solicitor.
Contracts determine what a buyer actually acquires. Reviewing them early identifies gaps, informal arrangements and terms that could be affected by a change of ownership.
Which categories should be reviewed?
Contract categories and why they matter before a sale
Customers
- Why it matters
- Revenue security, term, renewal and termination rights
Suppliers
- Why it matters
- Continuity of supply and pricing
Employees
- Why it matters
- Written terms of employment, restrictive covenants
Directors and senior staff
- Why it matters
- Service agreements, notice periods, incentives
Property leases
- Why it matters
- Security of premises, assignment and break clauses
Finance agreements
- Why it matters
- Lender consent or repayment on a change of ownership
Licences and permits
- Why it matters
- Whether they transfer or must be reapplied for
Distribution and agency
- Why it matters
- Exclusivity and continuation of key rights
Intellectual property
- Why it matters
- Who owns brands, designs, software and know-how
Software and IT
- Why it matters
- Licence terms, ownership of bespoke systems
Why do change-of-control and termination provisions matter?
Some contracts allow the other party to terminate, renegotiate or require consent if ownership of the business changes. Whether this applies depends on the contract's wording and on whether a sale is structured as a share sale or an asset sale. This guide does not provide legal advice; a solicitor should review significant contracts.
What about employees in an asset sale?
Where a business or part of it is transferred as an asset sale, the TUPE regulations generally protect employees' existing terms. Employers must give employees a written statement of the main terms of employment.
This guide is general commercial information based on professional experience of UK SME transactions. It is not legal, tax, accounting or financial advice, and transaction-specific requirements vary. Take advice from appropriately qualified professionals before acting.
Sources
Rules and thresholds change. Check the current position at the source and take professional advice before acting. Citing official guidance is not a substitute for professional tax or legal review.